Solving Big Budget Gap Tops Lawmakers' "To-Do" List

How would you solve the General Assembly's budget problem? More nasty cuts, or more tax hikes?

Seventeen days isn't much time for lawmakers and Gov. Dannel Malloy to patch up gaping holes in a two-year, $40-billion state spending-and-tax package, but that's all they have left before the 2015 session ends on June 3.

Their budget "To Do List" is long and ugly. It includes dealing with a politically iffy Democratic plan for a $1.1 billion tax package, funding for nursing homes that could help avoid a bitter strike, and warnings that Connecticut's public colleges may be at risk. Environmentalists fear some state parks could close, hospitals are complaining about added taxes, and there are calls for expanding the number of casinos and allowing keno gambling to raise more state money.

Also hanging fire are a bunch of controversial non-money issues, from police body cameras and use-of-force bills to the $15-per-hour minimum wage and immigrant drivers' licenses.

Lawmakers are sweating over how to solve massive gaps between expected state revenue and rising state expenses. Higher taxes are always politically dangerous, but so are the sorts of savage spending cuts that would be needed to fix this budget crisis.

Disputes between the governor and lawmakers over non-money issues have also inflamed legislative tempers, and that could make getting a budget deal even more complicated.

House Speaker Brendan Sharkey and Senate President Martin Looney of New Haven met with Malloy on Monday in his Capitol office in the first budget meeting since the finance committee voted on the tax package.

HARTFORD – In bad fiscal news for Connecticut, the comptroller said Wednesday that the state's budget deficit has increased to nearly $173 million because of worse-than-expected collection of taxes and federal grants.

Comptroller Kevin Lembo said that Gov. Dannel P. Malloy and the legislature should...

(CHRISTOPHER KEATING)

When asked if the budget would be approved by the adjournment, Malloy said, "It's a process. I'm hopeful that we can conclude it before June 3. What's important is that we get the right package, as opposed to when it's gotten. So if we need to go into special session, we're certainly prepared to do that. But I'm hopeful that we can get it done.''

The national debate over police use of deadly force, particularly against unarmed blacks during the past year, has pushed Connecticut lawmakers to seek reforms here. One bill up for consideration in the final stage of the session would require outside investigations of any police use-of-force death. Another calls for creating a state authorized pilot program for police body cameras in three Connecticut communities.

His plan also would eliminate "drug-free zones" around schools, day care centers and public housing for possession of small amounts of drugs. Critics of the current law say such zones, which include harsher penalties for drug possession within those areas, often cover large swaths of Connecticut cities.

Malloy said the current law unfairly penalizes urban blacks and Hispanics because they often face stiffer penalties than suburban residents for similar crimes. "To treat those folks differently because they live in those communities is patently unfair and, if not racist in intent, is racist in outcome," he said.

Republican opponents of portions of the plan were furious with Malloy's comments, which they interpreted as labeling them racist. House GOP members staged a five-hour walkout last week, and their Democratic colleagues also criticized Malloy's comments.

Anger and hostility over non-fiscal issues such as Malloy's criminal justice reforms could seep into fiscal negotiations, and make reaching a budget deal by the June 3 adjournment date even more difficult. If they don't succeed, lawmakers and the governor could face a long, difficult summer.

Before the high-profile dust-up between Malloy and the House Republicans, legislative leaders had been optimistic about finishing the budget by the regular adjournment date.

"I think everyone's working to put some parameters around what a budget looks like. I think I did a pretty good job of that initially, but we'll take a look at it,'' Malloy said. "Getting a budget done is a very high priority. Getting transportation started is a very high priority.''

Malloy is proposing a 30-year, $100 billion program to rehabilitate and improve Connecticut's deteriorating transportation system, including money for highways, rail, bus, and bike trails. The governor wants a $10-billion allocation in state bonding to kick-start the overall improvement program in the next five years.

Budget Gaps

Concerning the Democratic tax package that he has not yet embraced, Malloy said, "I've not threatened a veto, and I've not drawn a line, but I think people know where I am.''

Democratic legislators are finding themselves in the unpleasant position of being caught between Malloy's unpopular spending-cut proposals and the politically hazardous alternative of big tax increases.

The set-up for this grim, late-session push for a budget plan is an estimated $162 million deficit for the current fiscal year and lower-than-expected state tax and casino revenue.

Connecticut lawmakers routinely wait until the final weeks of a legislative session to make many key decisions. The big difference in 2015 is they are now staring at scary projections of $2.7 billion in budget gaps over the next two fiscal years unless big changes are made in taxes or spending. And the longer they wait to agree on a budget, the less time they'll have to tackle other hot-button bills and lawmakers' pet legislative projects.

Malloy promised during his successful 2014 reelection campaign not to push for new taxes as a budget solution. The $20 billion-per-year budget plan he offered in February instead relied primarily on spending cuts for prisons, higher education and a host of other programs, and collection of additional revenue from businesses and hospitals under a scheme that Republicans insist amounts to tax increases.

The Democrats who control both the House and Senate responded with their own $1.1 billion plan that raises taxes on the wealthy and extends the 6.35 percent state sales tax to a broad array of new services and businesses. Computer and data processing, management, scientific and technical consulting firms, design companies, veterinary services, hair dressing and dry cleaning operations all would be subject to the sales tax.

Democrats also restored state funding to a large number of agencies and programs that would have struggled with the cuts under Malloy's budget. State spending under their proposal would increase by 4.6 percent over the current fiscal year and by 3.3 percent for 2016-17.

Republicans reject both Malloy's budget and the Democratic alternative, arguing instead for a plan that would include a one-year wage freeze for all state employees, and slashing overtime payments to state workers by $220 million over two years. The Republican plan would restore funding for programs that include social services, senior citizens and probate courts that would be cut under a Malloy budget.

Malloy has criticized the Democratic proposal because of its reliance on tax increases, and warned GOP lawmakers that they are being unrealistic in attempting to balance the budget through reductions in state employee costs. He said the only way to do that would be to illegally break existing union contracts or through thousands of state layoffs.

The governor and his Democratic legislative allies, if they agree on a compromise, can push through a budget without GOP support. (Republicans offered to support Malloy if he vetoed a Democratic plan, but that's a very unlikely scenario.)

Education Funding

The largest legislative questions looming over education in Connecticut have to do with the budget and how much money will be allocated for education cost-sharing grants, for the state's public universities and colleges, for new charter schools seats, and for other programs in struggling school districts.

In his budget proposal, Gov. Dannel P. Malloy level-funded education cost-sharing grants and included $4.6 million to open two new charter schools. The appropriations committee increased funds for education cost sharing and eliminated the money for new charter schools in its proposal.

The leaders of the state's Connecticut State Colleges & Universities system and UConn say that if Malloy's proposed budget is enacted, they will face substantial budget gaps next year — $30 million for the CSCU system and $40 million for UConn. The appropriations committee has proposed narrowing those gaps — with an additional $19 million for CSCU and $26.5 million for UConn — but it's unclear how that proposal will fare.

One persistent proposal for easing the state's financial troubles is to increase revenue by expanding gambling.

A bill now awaiting action would allow Connecticut's Mashantucket Pequot and Mohegan tribes — which already operate major casinos in Ledyard and Montville — to open as many as three new casinos around the state. Advocates warn that existing state revenue from tribal casinos is dropping fast because of out-of-state competition, and say those revenues are likely to plunge further as Massachusetts and other neighbors open new casinos near our borders.

Also under consideration is a keno revival. That gambling game is already part of lottery operations in 15 states and was approved by Connecticut's legislature in 2013. Last year, lawmakers here had a change of heart and reversed course. Critics call keno an "ill-advised" bid for a quick revenue fix that could lead to online gambling and more gambling addiction.